Strong Alibaba IPO Demand May Raise Price and Shares for Sale

Alibaba Logo
Source: Courtesy of Alibaba
After just four days of a planned 10-day road show, Alibaba Group Holdings Inc. and its underwriters are expected to close order books for the initial public offering (IPO) that is currently set to price next Thursday and begin trading on Friday. The underwriters and advisers to Alibaba have suggested that the price range may rise and they may even raise the number of shares included in the offer.

Both Reuters and The New York Times are reporting that sources have said that the proposed price range of $60 to $66 per share has generated no pushback. Raising the price or adding to the number of shares would further widen the gap between Alibaba’s currently expected IPO take of $21.1 billion and Facebook Inc.’s (NASDAQ: FB) $16 billion IPO.

We have already noted the long list of potential risks that Alibaba investors, including the limited impact shareholders and the board of directors, will have on running the company.

Company founder and CEO Jack Ma is selling 12.75 million shares and reducing his stake in the company from 8.8% to 7.8%. Yahoo! Inc. (NASDAQ: YHOO) is selling 121.74 million shares, reducing its stake from 22.4% to 16.3%. The other major shareholder is Japan’s SoftBank, which owns 797.74 million shares (34.1%) and is selling none of them.

Unless the offering is changed, Alibaba will have 2,465,005,966 ordinary shares outstanding after this offering (versus 2,341,929,035 ordinary shares outstanding immediately prior to this offering).

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